Tag Archives: Netflix

Chris Anderson in his book The Long Tail describes how a new economic model has emerged that allows independents, niche players and obscure artists participate in the mass media industry. Before, in brick and mortar stores and businesses that possessed a limited amount of ‘shelf space’ it was necessary to stock items that provided guaranteed sales. Further, distribution models available from major mass media conglomerates limited the amount of exposure that artists could gain for their works. Choosing the items that will do not only well, but extremely well is a science and risks or long shots are not given a chance in this world of retail.

However, the era of Web 2.0 has upended this economic model. Cultural critics such as Andrew Keen and academics such as Henry Jenkins from the Comparative Media Studies Lab at MIT have discussed at length how new technological advances (read internet) have changed the way mass media operates. The proliferation of software, hardware and ‘shareware’ programs that allow users to upload and create content without having the technical skill or economic resources has added new markets and choices for consumers. It has also worked well for artists with the technical experience and resources to create but do not have access to major media conglomerates’ distribution systems and publicity machines.

Redbox is based on the old model.

Netflix is based on the new economic model.

How So?

Redbox, although a novel idea and very convenient, is based upon the brick and mortar model of conducting business. They offer new releases (up to 200) that are housed in a machine that can hold a limited amount of movies (700). You have to already be headed to one of the establishments (McDonalds, Walgreens, etc.) where they are located for it to be convenient. Otherwise you have to walk, bike or drive to pick up a movie in the same way you would visit a video store. Although it is extremely cheap ($1 per night) in comparison to major DVD rental stores such as Blockbuster or minor ones like Video Warehouse it is still a similar experience.

In order to enjoy the Redbox experience, you have to be willing to watch new releases only and be willing to go to a McDonalds, Wal-Mart, grocery store, etc., to rent movies. It may be fast but it only guarantees the “hits” and with a limited amount of space, you may not be able to get the movies you want. Even with their online service that allows you to make a reservation, it is based upon availability in the Redbox you will be going to.

Netflix on the other hand is based upon the new economic model created by Web 2.0. Users of the service have access to thousands of choices of DVDs. Very little physical output is required to bring about results. All you have to do is peruse the website, place your order and wait for it to arrive at your mailbox. There is no pressure to hurry up and choose because someone is standing behind you.

Netflix movie recommendation service also takes advantage of technological breakthroughs to help you with your movie choices. Netflix uses the “wisdom of crowds,” to borrow the title from James Surowiecki’s book, to make your movie experience better. It takes the ratings you provide and processes those with users who provide similar ratings to figure out what you may also like.

If you use Netflix’s service often it can be as cheap as the Redbox experience and it allows you to get what you want without having to leave your home. Plus, it truly does not have a late fee as you can keep the DVDs as long as you need to and will never be charged unless you end your service and never return the DVDs. Redbox claims there are no late fees and states that if you do not return your rental by 9PM you will be charged the daily fee of $1 for renting it another night. That is a semantic argument.

The Clincher

But it’s the number of choices that keeps Redbox from being a threat to Netflix. Once again it is that “long tail” that Chris Anderson refers to that protects Netflix from brick and mortar innovations such as Redbox.

Netflix offers the ‘New Releases’ as well as the less new, independent, foreign, classic, documentary, instructional, sports related, quirky and in some cases bad films people want to see. They handle the market that Redbox doesn’t want or can’t address due to space concerns. Yes, Netflix has physical locations it operates from, but a lot of their inventory can be stored online and not necessarily on DVD disks. Plus you can watch thousands of movies and other shows online through Netflix’s service.

Netflix can profit from the traditional base that Redbox profits from and from the non-traditional base. I believe Netflix is safe from offline threats; it is online innovation that they need to be concerned with.